China, Kazakhstan agree deals on gas, nuclear energy

China and Kazakhstan have agreed to build and jointly finance a gas pipeline and deepen atomic energy ties during a visit to the Central Asian country by Chinese President Hu Jintao.

Hu and Kazakh leader Nursultan Nazarbayev presided over the deals between state companies that will give China greater access to resources and will allow Kazakhstan, Central Asia's biggest economy, to diversify its energy exports, reports the Shanghai Daily.

State companies KazMunaiGas and China National Petroleum Corporation (CNPC) agreed to build and finance the Kazakh leg of a natural gas pipeline network. The $3 billion to $3.5 billion investment will be shared equally.

The Beyneu-Shymkent pipeline will join a larger pipeline that snakes 1,833 kilometres across Central Asia from a gas field developed by China in eastern Turkmenistan.

KazMunaiGas President Kairgeldy Kabyldin said the Kazakh pipeline would have capacity of 15 billion cubic metres. He said the pipeline would allow Kazakhstan to provide energy security for its southern regions, an area that currently relies heavily on gas from neighbouring Uzbekistan.

Kazakhstan, which last year surpassed Canada to become the world's largest uranium miner, will also increase shipments to China after its state nuclear company agreed a supply contract yesterday during the Chinese presidential visit.

Kazakhstan Concerns

Chinese firms have already established a foothold in Kazakhstan. Among recent deals, China Development Bank agreed last year to lend up to $2.7 billion to copper miner Kazakhmys and CNPC tied up with KazMunaiGas in a $2.6 billion deal to take over oil firm MangistauMunaiGas.

The growing and significant Chinese presence in Kazakhstan's lucrative energy market has aroused public concern, according to the BBC. Last month a group of Kazakh parliamentary deputies appealed to the country's energy minister Sauat Mynbayev. They asked him to "dispel the cloud" of concern regarding China's stake in the former Soviet republic's oil sector.

In a written answer, Mr Mynbayev said China held a 50-100% stake in 15 companies working in Kazakhstan's energy sector.

China significantly increased its interests in energy-rich Kazakhstan in 2009, in return for providing nearly $13bn in credits and loans.

It was timely help for a country hit by the global financial crisis. Kazakhstan had over-borrowed and had suffered from falling oil prices. "Once energy prices fell, Kazakhstan had to find ways to borrow money and along comes China, offering favourable conditions - lending huge sums at low rates of interest," says Sergei Smirnov, a business journalist with Kazakhstan's Expert magazine.

Regional observers say Kazakhstan needs to understand its neighbours' motives better. "People only see the short-term benefits. Kazakhstan sees China as a big wallet where it can get credits. But China is playing a 1,000-year game," political scientist Dosym Satpayev told the BBC.

As China provides economic support for Kazakhstan, he says, there is a risk that bit by bit it will also gain political leverage.